According to analysts from Wells Fargo, real net exports, which provided a positive boost to GDP growth in Q2, will exert a significant drag in Q3.
Key Quotes:
“Data released this morning showed that the U.S. trade deficit widened from $50.0 billion in July to $53.2 billion in August. The increase in red ink in the trade account came about as exports of goods and services dropped by $1.7 billion during the month while imports rose by $1.5 billion.”
“Although the tariffs that the U.S. government has levied in recent months may cause imports of the affected goods to weaken, overall growth in imports likely will remain solid in coming quarters as long as growth in domestic demand remains buoyant, which we forecast it will.”
“Real net exports of goods and services made a 1.2 percentage point contribution to the 4.2% GDP growth rate that was notched in the second quarter. But the recent pullback in soybeans along with other areas of weakness in exports means that real net exports will exert a significant drag on overall GDP growth in Q3. Although we expect that the drag from the external sector will lessen going forward, we look for net exports to exert modest headwinds on overall GDP growth in coming quarters.”
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